We recommend investors to overweight H shares, especially banking, insurance, property and infrastructure sectors. Hang Seng Index Performance

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1 7 th Aug, 2015 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 24, HSCI 3, HSCCI (Red Chips) 4, HSCEI (H-Shares) 11, Mkt T/O ($ Mn) 67, , Source: Bloomberg Market Outlook Eric Yuen ericyuen@guoco.com Hang Seng Index closed down 0.6% at 24,375. Market turnover dropped to $67.3 billion, the lowest in almost six months. Heavily weighted HSBC (5) added 0.2% whilst AIA Group (1299), China Mobile (941) and Tencent (700) shrank 0.6%, 0.7% and 1.1% respectively. Gaming operators like Sands China (1928) and Galaxy Entertainment (27) climbed 0.4%-0.6%. PetroChina (857), Sinopec (386) and CNOOC (883) tumbled 1.0%-1.5% on weak oil price. Local property stocks ended lower. SHK Properties (16), Wharf (4) and Hang Lung Properties (101) retreated 1.2%-1.8%. Li & Fung (494), the worst performing index stock for a second day, slid 4.2%. HSCEI declined 0.3% led by coal, insurance and securities stocks. China Shenhua (1088) and China Coal (1898) both decreased 2.2%. CITIC Securities (6030), Haitong Securities (6837), China Life (2628), Ping An Insurance (2318) and PICC Group (1339) lost 1.0%-2.0%. Chinese banks were mixed. Automobile and railway stocks rallied. BYD Company (1211) jumped 5.4%. China Railway Group (390) and CCCC (1800) grew 3.9%-5.0%. Valuation of HSCEI at historical PER of 8.1x is cheap by historical standard. We recommend long-term investors to overweight H shares, especially banking, insurance, property and infrastructure sectors. Oversea DJIA 17, NASDAQ 5, Shanghai SE Composite 3, Crude Oil Futures (US$) Gold Futures (US$) 1, Baltic Dry Index 1, USD / Euro Yen / USD HSCEI HSI 20-Day MA 11, , Day MA 12, , Day RSI We recommend investors to overweight H shares, especially banking, insurance, property and infrastructure sectors. Remarks: GuocoCapital Ltd is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. GuocoCapital Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong. Bullion trading services provides by GuocoCapital Bullion Ltd. Securities Futures Bullion Corporate Finance Wholly owned subsidiary of Guoco Group Limited (HKEx Stock : 53) A Member of the Hong Leong Group

2 Industry / Corporate News Eric Yuen ericyuen@guoco.com BUY Shenzhen Investment (604) on extremely strong contracted sales Reiterate BUY Major beneficiary of booming property market in Shenzhen Risk Level: High Achieved contracted sales growth of 195% yoy in 7M15 and 101% of full year sales target Time Horizon: Medium Undemanding valuation at forward P/B of 0.65x and dividend yield of 6% China s property market witnessed a strong recovery in past three months thanks to a continuous interest rate cuts and relaxation in mortgage lending policies. National property sales value grew 10.0% yoy in 1H15 on the back of a 3.9% yoy growth in sales GFA and 5.9% yoy increase in ASP. On monthly basis, national property sales value surged 32% yoy in June and 24% yoy in May versus a negative growth of 3.2% yoy in the first four months of Newly started GFA declined 15.8% yoy in 1H15 showing that property developers have generally accelerated the process of de-stocking. Average new home prices in China s 10 and 100 major cities increased for three straight months through July according to China Index Research Institute. New home price in Shenzhen surged 16% yoy in June. We believe the recovery in China s property market is sustainable in 2H15 because China has room to further cut interest rate and the problem of excess inventory in the first tier cities has been eased. Shenzhen Investment (604, $3.01) is one of the best performing Chinese property stocks with share price up 35% year-to-date. The Shenzhen government is the ultimate controlling shareholder with a stake of 60.7%. Its share price dropped 13.5% since our BUY commentary dated July 21 which is unfair in view of its strong contracted sales year-to-date. We stick to our BUY rating on this counter given its cheap valuation, solid financial position, strong contracted sales performance and heavy exposure to Shenzhen s property market. The company s development landbank measured a total attributable GFA of 9.8mn sq.m. by end-2014 of which approximately 19% is located in Shenzhen. Thanks to strong take-up for its property projects in Shenzhen, the company achieved contracted sales of RMB3.5bn in July and RMB11.15bn in the first 7 months of 2015 representing (i) an increase of 195% yoy, (ii) 152% of full year contracted sales in 2014 and (iii) 101% of the contracted sales target of RMB11.0bn for In June 2015, the company placed 670mn new shares with institutional investors at $4.13 each to raise net proceeds of $2.73bn. The share placement is expected to lower company s net debt-to-equity ratio to 51% from 65% by end-2014 compared to industry average of 80%. According to Bloomberg estimates, the company is currently traded at 1H15 P/B of 0.65x, 2015 dividend yield of 6.0%, 2015 PER of 6.5x with core EPS growth of some 60%. Valuation is undemanding in our view. Our 6-month price target is unchanged at $4.20 based on 0.9x book value. Analysts consensus price target is $4.90. Recent Recommendations Stock Pick Rating Recommendation Highlights TP China Lesso (2128) Buy Recent retreat creates a good buying opportunity for China Lesso (2128) $7.75 FIH Mobile (2038) Buy Market has penalized FIH Mobile (2038) for a wrong cause. Reiterate BUY $5.04 Cosco Int l (517) Buy BUY Cosco Int l (517) as a defensive play with asset injection potential $5.05 China High Speed Valuation of China High Speed Transmission (658) looks cheap following the recent Buy Transmission (658) correction. Reiterate BUY $8.80 Xinyi Glass (868) Buy Maintain BUY on Xinyi Glass (868) as margin should continue to improve despite sluggish property market in China $5.20 Shenzhen International (152) Buy BUY Shenzhen International (152) on anticipation of strong interim results $15.00 Sunny Optical (2382) Hua Hong Semiconductor (1347) Hold Valuation of Sunny Optical (2382) now seems fair to us after the recent correction. Upgrade to HOLD $15.50 Buy Maintain BUY on Hua Hong Semiconductor (1347) due to cheap valuation $11.60 Techtronic Industries (669) Buy Reiterate BUY on Techtronic Industries (669) to ride on the strong US housing trends $32.70 Huaneng Renewables (958) Buy BUY Huaneng Renewables (958) on strong interim results $3.85

3 Technical Ideas CGN Power (1816, $3.63) TP: $4.01 BUY Risk: High Time Horizon: Short CGN Power operates and manages nuclear power generating stations. The company sells all of the electricity from its stations, manages, oversees the construction of nuclear power stations, and provides technical research plus develops support services. CGN Power has stations in Guangdong, Fujian and Liaoning, and is a subsidiary of China General Nuclear Power Corporation. The counter dropped a max of 47.5% from its 52-week high of $5.53 on 5 June until it found critical support at $3.07. The counter rose 5.2% yesterday, surpassing sma20. 9-day RSI also exceeded 50 with a sharp increasing trend, indicating the counter's positive outlook ahead. Source: Bloomberg, GuocoCapital BUY. Short-term target at $4.01. Cut loss at $3.33. Consensus 2015 PER: 20.8x Consensus target price: $4.56 China COSCO (1919, $4.35) TP: $4.89 BUY Risk: High Time Horizon: Short China COSCO offers marine freight transportation services. The company offers container shipping, dry bulk shipping, logistics services, freight forwarding, and terminal and container leasing services internationally. China COSCO operates container ships and terminals, and manufactures shipping containers. The counter dropped a max of 61.0% from its 52-week high of $8.16 on 28 April until it found support at $3.66. The counter rose 7.9% yesterday, surpassing sma20 and sma day RSI exceeded 50 with a sharp increasing trend, indicating the counter's strong uptrend momentum ahead. Source: Bloomberg, GuocoCapital BUY. Short-term target at $4.89. Cut loss at $3.86. Consensus 2015 PBR: 1.5x Consensus target price: $4.33

4 RSI Indicator Overbought (9-day RSI> 80) Tickers Oversold (9-day RSI<20) Tickers 708, , 653, 1191, 2333, 3836, 6808 Exceptional Turnover & Price Movements Stock Stock Last Price ($) Price Change (%) Turnover / 3-mth daily avg turnover Target price up / downside (%)* Rating*^ Suncorp Technologies N/A 1.0 N/A Synertone Communication Corp N/A 3.7 N/A Goldin Financial N/A N/A N/A BEP International N/A 1.0 N/A Anta Sports Products Prada S.P.A Source: Bloomberg, GuocoCapital; * Based on consensus estimates ^ The Rating indicates analysts opinions on the security. It is calculated by converting analysts recommendations into a number from 1-5 and taking the average. 5 is the best while 1 is the worst PER*

5 A-H Share Premium / Discount (%) Average AH Shanghai Listed -44.7% Premium/Discount (%) Shenzhen Listed -50.5% Remark: Shenzhen-listed stocks are not included in the upcoming cross-border stock trading pilot program H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) H Share A Share A-H Shares Shanghai Listed Company Name A Close (RMB) H Close (HKD) AH Price Gap (%) Luoyang Glass New China Life SSC China Insurance Shenhua China Shipping Haitong Energy Securities Chongqing Container Iron Huatai Securities Co GAC Group Shanghai Ltd Pharm China Huaneng Power Intl Molybdenum Yanzhou Coal Huadian Power Intl Nanjing Mining Panda Shanghai Fosun Shanghai Electronics Electric China Pharm Everbright MCC China Bank Minsheng Dalian Port Bank Bank of China Shenji Group Sinopec Beijing Kunming Jingcheng BoComm Beijing Machinery North Star China Life Insurance China Cosco ABC First Tractor Citic Securities Chalco CCB Sinopec Shanghai ICBC China Petrochem Coal Energy Tsingtao Brewery Tianjin Capital China Merchants Environment Magang Fuyao Bank Glass Zhengzhou Coal Anhui Conch Guangzhou Mining Jiangsu Cement Express China Shipyard Oilfield CPIC China Services Shipping Ping An Insurance Datang Development Intl Power Group Sichuan A-H Shares Shenzhen Listed Zijin Expressway Mining Shandong Molong China Railway Zhejiang Petroleum Shibao China Group Eastern Northeast Electric Dongfang Airlines Electric Shandong Develop Xinhua BBMG Shandong Pharm Chenming CRRC Corp Weichai Paper Power Jiangxi Copper Hisense Kelon CRCC BYD Guangzhou Pharm Livzon Pharm Anhui Expressway Zoomlion Heavy Shenzhen Express Dongjiang Industry Env China Southern Angang Steel Petrochina Air China International Guangshen Jingwei Marine Textile China Railway Citic Bank GF Securities Machinery Co Ltd CCCC Xinjiang Goldwind Great Wall Motor ZTE Sci&Tec Corp Air China China Vanke

6 HSI & HSCEI Constituents Performance Price Change (%) Index 5 D 1 M 3 M vs 3M High Hang Seng Index Hang Seng China Ent Index Outperform Underperform Mixed Cement, Gaming, Infrastructure, Power, Utility Coal, Insurance, Oil, Securities, Telecom Airline, Automobile, Consumer, Global Player, HK Property Price Change (%) Price Change (%) Stock vs 3M Stock vs 3M Company Name 5 D 1 M 3 M Company Name 5 D 1 M 3 M High High 1211 BYD Company China Unicom Anhui Conch AIA CNBM Hengan Int'l China Railway Tencent CM Bank Sinopharm Air China Huaneng Power Dongfeng Group Cathay Pac Air China Comm Cons CITIC Bank Galaxy CITIC Securities Entertainment Sands China CNOOC CGN Power China Mer Hldgs GAC China Overseas China Resources China Telecom Dalian Power Wanda Henderson Land HSBC Hldgs Sinopec Corp MTR Corporation China Shenhua Belle Int'l China Life Hang Seng Bank CK Property -2 0 N/A China Vanke New China Life CK Hutchison PICC Group Hldgs CITIC Ltd Wharf Longyuan Power Jiangxi Copper China Cinda HKEx HK & China Gas Kunlun Gas CLP Hldgs SHK Prop Tsingtao Brew Swire Pacific 'A' BOC Hong Kong Tingyi CCB Hang Lung Prop ABC PICC P&C China Mobile China Oilfield New World Dev Ping An Minsheng Bank GreatWall Motor BOCOM Haitong Securities Link REIT Lenovo Power Assets Want Want ICBC Bank of E Asia China Resources China Coal China Pacific China Mengniu Insurance Sino Land PetroChina Dairy Bank of China Li & Fung China Res Land

7 Upcoming Events Date Stock Company Name Event Aug China Resources Cement Interim Aug Orient Overseas International Interim Aug Shenwan Hongyuan HK Ltd Interim Aug South China Financial Holdings Interim Aug Truly International Interim Aug Uni-President China Interim Aug United Energy Group Interim Disclosures Investment Rating System Ratings Description GuocoCapital s investment rating system is Buy Expected positive return of > 10 % divided into investment ratings, risk rating Investment Ratings Hold Expected return range of ~ ±10 % and investment time horizon. The rating Sell Expected negative return > 10% scale is subject to change upon periodic High (H) 90-day volatility of > 50% review of market by research department. Risk Ratings Medium (M) 90-day volatility of > 30-50% Assigned ratings are based on company Low (L) 90-day volatility of < 30% and sector historical performance and analysts intrinsic valuation of the stock Long (L) 6 12 Months Investment Time Medium (M) 3 6 Months Horizon Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage GuocoCapital Limited 12/F, The Center, 99 Queen s Road Central, Hong Kong Tel: (852) Fax: (852) This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither GuocoCapital nor any of its associated companies, (nor any employees or other persons connected with any of them) accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. However, it is hereby declared that neither GuocoCapital nor the writer, at the time of writing, has interest in any of the securities mentioned in this report. GuocoCapital Ltd is licensed by the Securities and Futures Commission to carry on Types 1, 4, and 6 regulated activities in Hong Kong. GuocoCapital Futures Ltd is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong.